Dubai warns of backlash if U.S. kills deal

DUBAI, United Arab Emirates — To many in this booming financial center, the American backlash over Dubai running U.S. ports boils down to something simple — and ugly: “This is Arab-phobia,” says one Arab security analyst. “I can see no other reason behind it.”

Many Arabs go further, saying the basis of American policy toward the Middle East may be at stake: If the United States can’t work with a moderate, friendly and socially liberal Arab ally like Dubai, it may not be able to work with any Arabs at all.

“If the American politicians were smart, they would hold Dubai up as a role model,” said Abdul Khaleq Abdulla, a political scientist at Emirates University. “Punishing us sends the wrong message.”

Egyptian billionaire Naguib Sawiris said Arab investors may pull money from the United States because of the country’s opposition to Dubai’s takeover of American port operations.

U.S. lawmakers are trying to delay the $6.8 billion sale of British company Peninsular & Oriental Steam Navigation Co., which operates six ports in the United States, to Dubai government-owned Dubai Ports World (DPW).

“This may have a very negative effect on Arab investment,” Mr. Sawiris, 51, who bought Italian mobile phone provider Wind Telecomunicazioni SpA in August in a transaction worth $14.5 billion, told Bloomberg News. “What the U.S. is doing is very dangerous.”

Investors from the Persian Gulf are flush with cash after oil sales by Kuwait, Saudi Arabia and the four other oil-producing monarchies surged 24 percent last year to $270 billion, according to figures from Standard Chartered PLC.

Arabs may seek to put more of their surplus wealth in Europe, Asia and at home, said Ali al-Shihabi, chief executive officer of Rasmala Investments LLC, a Dubai investment bank with $500 million under management.

U.S. resistance to the DP World takeover “send a message to all Arab investors, that will make them, by definition, more cautious to go to the U.S.,” he said.

Dubai has emerged in recent years as the Persian Gulf’s most glittering city, a cosmopolitan tourist destination for the British, other Europeans, Asians and Arabs alike. It is best known for building resort islands shaped like palm trees and the construction of what is expected to be the world’s highest skyscraper, but it has also diversified into a major banking center.

Arab investors who pulled their capital out of the United States after the September 11 attacks — fearing asset seizures under the Patriot Act — want to reinvest, said Mustafa Alani, a security analyst with the Dubai-based Gulf Research Center. But anti-Arab sentiment in Congress will push those funds to friendlier markets in Asia and Europe.

“This is a major long-term investment,” Mr. Alani said. “If it’s going to be undermined for unjustified reasons, that will tell Arab investors and governments to keep away from the United States.”

Many say the tone of U.S. critics has shocked them: Dubai styles itself as a Mideast Switzerland, steering clear of conflict and focusing on business.

“We don’t like the tone of this,” Mr. Abdulla said. “Many of us see a hint of racism there, disguised as security concern.”

U.S.-based private intelligence firm Stratfor noted that “the government of the UAE is about as pro-American as you can get” in the region. “If the United States can’t do business with the UAE, then the United States cannot do business anywhere in the Islamic world,” it said.

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